Prince Harry’s substantial compensation payout, reportedly over £10 million and potentially as high as £20 million, is expected to be significantly reduced by legal fees and U.S. federal taxes under Donald Trump’s administration.
The Duke of Sussex recently secured the settlement, along with a “full and unequivocal apology,” from News Group Newspapers in an out-of-court resolution. However, Daily Mail columnist Richard Eden questioned how much of the payout Harry will actually retain. “The majority is thought to be for his lawyers’ fees,” Eden noted. “What remains will, I hear, have to be shared with Donald Trump’s administration.”
As a U.S. resident, Harry is required to pay taxes on his global income unless it has already been taxed in the UK. However, legal damages are not subject to taxation in Britain, creating a tax liability in the U.S.
The top marginal income tax rate in the United States is 37%, applicable to individuals earning over $626,350 (£503,963) or married couples filing jointly with incomes above $751,600 (£604,780).
Adding to Harry’s financial challenges, Donald Trump has threatened to double tax rates for foreign nationals residing in the U.S. through an obscure provision in the U.S. Tax Code, Section 891, which allows punitive taxation on foreign citizens and businesses. Trump, who signed an executive order referencing this provision, has previously criticized Harry’s immigration status and referred to Meghan Markle as “nasty.”
Speculation has also arisen about Harry’s visa status, particularly after his admission of past drug use in his memoir Spare. Some believe this could lead to his deportation. Journalist Tom Bower remarked, “Harry must be worried because Trump warned that the Prince would not get special privileges. Until now, Harry was protected by the Biden administration, which prevented a U.S. court from releasing Harry’s 2020 visa application.”
The financial and legal complexities surrounding the settlement highlight the challenges Harry faces as a non-citizen navigating U.S. residency and tax obligations. Meanwhile, Trump’s policies could further complicate the Duke’s situation, potentially making the former president an unexpected beneficiary of Harry’s payout.
